LOS ANGELES – The former CEO of a Valencia-based financial services company was sentenced today to 33 months in federal prison for helping to run a Ponzi scheme that defrauded dozens of investors – including his own clients – out of over $2.3 million with false promises of earning up to 20% monthly returns on their money.
Scott Allensworth, 68, of Santa Clarita, was sentenced by United States District Judge John A. Kronstadt, who also ordered him to pay $2,321,429 in restitution.
In July 2021, Allensworth pleaded guilty to one count of wire fraud.
Allensworth was the owner and CEO of Capital Growth Group Associates (CGGA), a company that provided financial services to clients, including tax advice and return preparation services, accounting services, retirement planning and investment advisory services.
From November 2015 to March 2017, Allensworth schemed to defraud investors along with David Hunt Weddle, 66, who managed a private investment fund through JustInfo LLC, a company Weddle controlled and operated out of his Somerset, Kentucky home.
Allensworth and Weddle solicited money – to be invested with CGGA and Weddle – from victim-investors, who included Allensworth’s clients. These clients trusted him based on their prior relationship with him, and recommended Allensworth to their friends and family members, who also became victims of the scheme.
To lure victim-investors, Allensworth and Weddle promised them that their money would go into a brokerage account, and they would soon realize profits because Weddle employed a special trading strategy that would limit their losses and generate investment monthly returns of between 5% and 20%.
Instead of investing the money as promised, Allensworth and Weddle used part of the funds to pay for their personal expenses, including – for Allensworth – credit card bills. In Ponzi style, they also used victim-investor money to repay and fund withdrawals requested by other victim-investors, falsely representing that the money comprising these withdrawals arose from their investment gains.
Allensworth and Weddle failed to inform victim-investors that neither of them was registered or licensed as a commodity trading advisor and that the United States Securities and Exchange Commission had subpoenaed both of them in December 2016.
Weddle also fabricated multiple false account statements which they sent to victim-investors that purported to show the investments were steadily increasing in value based on Weddle’s trading activity, when Allensworth and Weddle had misappropriated the funds.
As a result of the fraudulent scheme, Allensworth and Weddle caused more than 50 victims to suffer total losses of approximately $2,320,000.
Weddle pleaded guilty in March 2021 to one count of wire fraud. He is serving a 41-month prison sentence for that crime.
The SEC brought civil charges against Allensworth, Weddle and JustInfo LLC in October 2017. That case settled the following year with the defendants agreeing to pay more than $300,000 in civil penalties.
The FBI investigated this matter.
Assistant United States Attorney Steven M. Arkow of the Major Frauds Section prosecuted this case.